PM USA Extends MLP

Published in CSP Daily News

Promotional pricing option meeting company's expectations

By  Mitch Morrison, Vice President & Group Editor

RICHMOND, Va. -- Philip Morris USA is extending its groundbreaking Marlboro Leadership Price (MLP) option through year's end, CSP Daily News has learned. Set to expire October 1, MLP is the industry's first known cigarette promotion that imposes a retail price ceiling in exchange for a 20-cent per-pack discount and state-specific price incentives.

In a letter sent to retailers dated August 22, the Altria Group Distribution Co. said retailers participating in the higher levels of PM USA's Retailer Leaders program would be eligible to sign up for the MLP through the end of the year.

"It's an extension of the time period," confirmed company spokesperson Greg Mathe. "The same rules apply. There have been no changes."

MLP was first announced in March and became available in early April. The program, which PM USA said it aims to help cash-tight smokers hurt by the country's economic crawl, immediately triggered a hailstorm of criticism from convenience retailers, many of whom accused the tobacco giant of moving toward price fixing.

PM USA officials flatly denied the accusations, emphasizing that MLP was an optional program--not mandatory--and that retailers would have the luxury to opt in and out on a store-by-store and month-to-month basis.

More recently, retailer criticism has ebbed. While a number of prominent chains continue to buck the program, others have embraced it, and some have adopted it for a portion of their networks.

On its July earnings call, Altria's CEO and chairman Mike Szymanczyk said MLP had "pretty much" met company expectations, noting, "we've had broad acceptance and participation in this program, and that's occurred pretty rapidly."

Altria has declined to share specific numbers as to what percent of operators in its upper level Retail Leaders program have switched to MLP, but analysts and industry experts agree it's more than what many first predicted.

In part, that is because many chains opposed to the program signed up to protect their premium cigarette share. Also, a cadre of prominent regional powerhouses that traditionally price cigarettes aggressively embraced MLP to generate additional profits and potentially grow volumes.

While the program is now certain to continue through year end, company officials remained mum about their plans for 2012.

To learn more about the effectiveness of the MLP program, watch for the October issue of CSP magazine.

By Mitch Morrison, Vice President & Group Editor
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